The latest Boeing and aerospace news, including updates about the Boeing 787 Dreamliner, 747-8 and 737, Airbus A380 and A350, the anticipated Boeing 797 and Boeing jobs and layoffs

Note: This is a seattlepi.com reader blog. It is not written or edited by the P-I. The authors are solely responsible for content. E-mail us at newmedia@seattlepi.com if you consider a post inappropriate..

Northrop Grumman says it won’t bid on tanker without changes

Northrop Grumman pull out of the Air Force’s aerial refueling tanker competition unless the Pentagon changes its criteria, a company executive wrote Tuesday.

“(A)bsent a responsive set of changes … Northrop Grumman has determined that it cannot submit a bid” for the tanker, Wes Bush, Northrop’s president and chief operating officer, wrote in a letter to Ashton Carter, the Pentagon’s acquisitions chief, according to a copy obtained by InsideDefence.com.

Northrop spokesman Randy Belote confirmed that Bush sent such a letter Tuesday.

“Northrop Grumman sent a letter to Mr. Carter informing the Defense Department that it would not submit a tanker proposal unless significant changes were made to the draft RFP,” he said. “We have been very clear, I think, in our communications with the Air Force that we’ve had significant concerns with the draft RFP, and recent communications from the Air Force basically have indicated that our concerns were not being addressed.”

In response to the letter, the Department of Defense issued a statement saying: “The Department regrets that Northrop-Grumman and Airbus have taken themselves out of the tanker competition and hope they will return when the final RFP is issued.”

Boeing tanker spokesman Bill Barksdale said: “We are focused on constructive engagement with our customer in order to offer an advanced tanker that meets their need.”

Northrop Grumman officials sponsored a news conference (video) in October to complain that the draft request to replace the Air Force’s Eisenhower-era KC-135 tankers favors rival Boeing’s smaller 767-based tanker over the Northrop-EADS team’s Airbus A330-based aircraft. That’s because the request it would award the contract to the lowest-priced plane that meets a set of mandatory criteria, after adjusting for certain factors, rather than looking at the best balance of price and capabilities.

“We’re convinced that the draft RFP prefers a smaller tanker aircraft with less multi-role capability, placing our tanker at a disadvantage,” Belote said Tuesday. “Second, the draft RFP places financial and contractual burdens on the company that we simply cannot accept.”

Some have argued that the government shouldn’t buy a bigger, more expensive plane, better value or not, if it doesn’t really need more size. In fact, a separate contract will replace the Air Force’s larger KC-10 tankers.

Responding to that argument, Belote noted that the Air Force previously awarded the initial tanker contract to Northrop Grumman last year in large part because it had a bigger plane. The Pentagon threw out that award after congressional auditors found serious flaws in the process.

“What changed in a year and a half?” Belote asked.

As for the financial and contractual issues, Mitch Waldman, Northrop Grumman’s vice president for business development, said in October that the proposed 18-year fixed-price contract structure was unreasonable, given continuing risks from development and changes over the course of building the initial aircraft.

Defense analyst Loren Thompson, of the Virginia-based Lexington Institute, told Reuters that Boeing officials also are concerned about the fixed-price provisions, and the amount of risk that put onto the bidders.

“To ask people to bid fixed prices on things that may not materialize until 18 years in the future is simply absurd,” he said in the story.

Bush’s new letter follows a Nov. 4 letter in which he said Northrop may not be able to bid without meaningful changes to the criteria and recommended that the Pentagon put out a second draft request for proposals.

In the previous competition, Pentagon officials adjusted criteria in order to keep Northrop Grumman from dropping out of the competition. Bush noted the government’s desire to have more than one bidder, writing: “we are aware of how important it is to the credibility of the ultimate KC-X tanker award that it be arrived at competitively.”

The Pentagon’s response to Bush’s letter appeared to preclude changes to keep Northrop in the bidding.

“The Department wants competition but cannot compel the two airplane makers to compete,” the statement said. “Both offerors have suggested changes to the RFP that would favor their offering. But the Department cannot and will not change the warfighter requirements for the tanker to give advantage to either competitor. The Department has played this right down the middle and will continue to do so.”

The Pentagon said it is still reviewing comments and questions about the draft request for proposals and will probably release a final request in January.

One problem in trying to set up a fair competition is that the Air Force’s requirements were virtually certain to favor one of the two tankers, because they’re very different aircraft.

“You either decide that you want just a tanker or you decide that you want a highly capable multi-role tanker transport,” Seattle-based analyst Scott Hamilton said Tuesday. Boeing’s plane is the “just a tanker” option.

As for Belote’s “what’s changed” question, one answer is that there’s a Democrat in the White House. Boeing has more of a Democratic constituency than Northrop, whose tanker would be assembled in Republican-heavy Alabama.

Responding to Northrop’s letter, U.S. Sen. Patty Murray, D-Wash. — who chairs the Senate’s Appropriations Defense Subcommittee — said in a statement that the “Airbus” was attempting to tilt the competition in its favor.

“This is a new competition, but the players are the same and Airbus is up to its same old tricks,” she said. “When the last draft Request for Proposal was released, Airbus threatened to drop out unless the requirements were tilted in its favor and they are using the same tactics this time around. The end result was a bad deal for our warfighters, our taxpayers, and yet another delay in getting a new tanker into the hands of our military.

“It’s time to move forward with a fair and transparent competition based on the needs of our military, not the bullying of an illegally subsidized foreign competitor who has made no secret of its attempts to undermine the American aerospace industry and the jobs it supports.”

Note: This is a seattlepi.com reader blog. It is not written or edited by the P-I. The authors are solely responsible for content. E-mail us at newmedia@seattlepi.com if you consider a post inappropriate..